Buying a home can be a lengthy, emotionally and financially draining process. Knowing what to expect can help ensure the process goes as efficiently as possible.
Get Finances in Order
As discussed in the "Obtaining a Mortgage" section of this tutorial, the first step in home buying is to get one's finances in order. Taking a close and realistic look at expenses and income can help buyers decide how much house they can afford. It's important to actually make calculations and not just guess. Also, buyers can order a copy of their credit reports and determine ways to improve the score. Doing so can lead to more favorable mortgage terms.
Learn About Mortgage Lenders and the Mortgage Process
Familiarizing oneself with the mortgage process and the various types of mortgage lenders can help buyers become confident and knowledgeable borrowers. Borrowers will be able to make more well-informed decisions if they understand the language and the process.
Get Pre-Approved for a Mortgage
Pre-approval helps determine how much a buyer can afford to borrow. Lenders can determine this figure by looking at the borrower's financial information such as credit score, debt-to-income ratio and income. Being pre-approved for a mortgage also legitimizes a buyer's offer to purchase a home. A seller is more likely to consider an offer from a pre-approved buyer than one who simply says he or she will be able to secure the necessary mortgage.
Narrow Down Wants and Needs
Buyers should write down a list of their needs - the things that they absolutely have to have - and their wants - the features they would love to have but could do without if necessary. Making the distinction between needs and want can help buyers find the best home for their money. Needs might include things like close to the city, good school district and three bedrooms. Wants might include a two-car garage, fenced-in yard and a cul-de-sac.
Find a Real Estate Agent
Buyers who plan on working with a real estate agent can find one through word of mouth (a friend, family member or coworker might be able to make a recommendation), by visiting open houses or by conducting an Internet search. An in-person meeting with the agent can help determine if the agent will meet the buyer's needs, and allow the buyer to ask any questions about the potential agent's duties and responsibilities. Some agents will request the buyer to sign certain agreements such as an exclusivity agreement. Be sure to understand the terms of any agreements or contracts before signing.
Start the Search
The real estate agent may ask for a wish list that identifies the needs and wants of the buyer. Most agents have access to a multiple listing service (MLS) - an inventory of all homes listed by participating brokers and agents. The agent can narrow down the search by specifying the property type, location/neighborhood, price range, minimum number of bedrooms and bathrooms, minimum square footage, property age and type of sale (including foreclosures and short sales). Additionally, the agent will be able to filter for features such as water front, screened in porch, wraparound deck or other desired elements.
Before making an offer, buyers should consider the home's resale potential, contract contingencies (such as appraisals to substantiate the purchase price, home inspections, pest inspections and a preliminary title report) and any deed restrictions or easements on the property. A real estate can typically provide some valuable guidance during this stage.
Make an Offer
Few buyers find the perfect house immediately, and most visit many homes before making any decisions. Once an ideal home has been found that is within the buyer's price range, he or she can make an offer to purchase the property. If working with a real estate agent, the agent will bring all offers to the seller, who will either accept the offer or make a counter offer. This process can involve going back and forth several times until a fair and acceptable price has been decided upon.
Home Inspections and Other Tests
Contract contingencies allow buyers to cancel a contract without penalty under certain circumstances. For example, federal laws give buyers 10 days to inspect for lead-based paint (many homes built prior to 1978 contain lead-based paint). If the buyer determines the home has lead-based paint, he or she may back out of the contract without penalty.
Closing, or settlement, is the event that transfers ownership of property between two parties. The property will be recorded in the buyer's name, and the city or county will be notified of the transaction and record the buyer as the new owner of the property.
Personal FinanceWe provide top tips on how to help sell your home in a rough market.
InvestingFind why buyers back out and what you can do if you're left holding the bag.
Personal FinanceEven a 1% reduction in real estate commissions can save you thousands of dollars.
InvestingBuying or selling a home? What you need to know about real estate agent and broker fees.
Personal FinanceDon't put the sale of your home at risk by committing one of these dirty deeds.
Personal FinanceAvoiding these errors will help ensure that your home sells quickly while allowing you to keep that commission fee for yourself.
Personal FinanceTake a look at some of the fastest selling markets and learn home buying tips to help you get in on the action.
Personal FinanceSelling your home on your own can save you money. But you'll need market knowledge, marketing skills and the drive to successfully sell your home.
Personal FinanceSome things can get in the way of owning your dream home, but they don't have to.
Personal FinanceWhile there are times when a real estate agent earns the commission, there are other times when you can do it yourself.